Selling your home? The profit is usually tax-free.
In Canada, the gain on the home you live in is generally exempt from tax. The catch is that you have to report the sale and make the claim.
How it works, in three steps
- 1Your home can be a principal residence. That is the home you or your family lived in. A family can designate only one property as its principal residence for any given year.
- 2You report the sale on your tax return. The CRA requires you to report the sale and designate the property on Schedule 3, and to complete Form T2091(IND), even when no tax is owed.
- 3The gain for the years you designate is exempt. If every year qualifies, the whole gain is tax-free.
Forgetting to report can bring a penalty, so treat the form as part of the sale, not as optional paperwork.
When it does not work that way
If you owned a home for less than 365 days before selling it, the CRA generally treats it as a flipped property. The profit is taxed as business income, with no principal residence exemption and no half-taxable capital gain, unless a life event such as a job loss applies.
Does the exemption cover me?
It likely does if you
- Sold the home you live in
- Lived there for the years you are claiming
- Report the sale and make the designation
Be careful if
- Part of the home is rented out or used for a business
- You also own a cottage or second home, since only one property per family per year can be designated
- You bought and sold within a year
The honest catches
- Reporting is required. A late designation may be accepted, but a penalty can apply.
- Rentals are different. A property you only rent out is generally taxed on its gain. The rental property guide covers that.
- Your situation may not be simple. Moves, separations and part-year use can change the answer, so check with an accountant.
This is education, not tax, legal or investment advice. Talk to a licensed Canadian chartered professional accountant or certified financial planner before you act.
Selling a property that does not qualify?
Rentals, second properties and flips are taxed as gains or business income. Estimate the tax on a gain with the calculator.
Open the Capital Gains Tax Calculator